Alcohol Liability Insurance for Small Businesses – Forbes Advisor

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If your small business sells, serves or distributes alcohol, you may need alcohol liability insurance. An alcohol liability insurance policy covers claims for property damage or bodily injury caused by an intoxicated person after being served alcohol by a business.

Alcohol liability insurance is also called dram shop insurance.

If your small business is sued, an alcohol liability insurance policy can help by covering:

  • Legal costs, settlements and judgments
  • Medical bills
  • Repair costs to repair damaged goods

What is alcohol liability insurance?

Alcohol liability insurance protects businesses that sell or serve alcohol. A policy covers property damage and bodily injury caused by an intoxicated person after you serve or sell them alcohol.

This type of business insurance, which is required in most states, covers legal fees, medical bills, repair bills, settlements, and judgments if your business is at fault for an alcohol-related problem.

What does alcohol liability insurance cover?

Alcohol liability insurance covers claims related to drunk driving, assault and property damage.

Here are some examples of where alcohol liability insurance can help:

  • A person is involved in an accident causing injury after your restaurant overserves them.
  • A minor buys alcohol in your store, gets drunk and crashes a vehicle through a window.
  • An overserved customer assaults someone outside your bar.

These are all cases where alcohol liability insurance can help you if you are sued.

Who needs alcohol liability insurance?

In most states, alcohol liability insurance is required for businesses that sell or serve alcoholic beverages. And depending on your state, you may need an alcohol liability insurance policy to obtain a liquor license for your business.

Here are examples of businesses that may need alcohol liability coverage:

  • Bars and taverns
  • Breweries and wineries
  • caterers
  • grocery stores
  • liquor stores
  • Restaurants

States without dram store laws

Liquor store laws make small businesses liable for selling liquor to people who then cause injury or property damage. Most states have some sort of dram store law, with rules varying from state to state, but these states do not:

  • Delaware
  • Kansas
  • Maryland
  • Nevada
  • South Dakota
  • Virginia

Cost of alcohol liability insurance

Several key factors affect the cost of alcohol liability insurance:

How to buy alcohol liability insurance

Many insurance companies offer alcohol liability insurance, so it’s wise to get quotes from multiple insurers to find the best rate. A good place to start is with your small business insurer for other types of coverage.

You can usually add alcohol liability insurance as an endorsement to a general liability insurance policy. Alcohol liability insurance can also be purchased as a standalone policy or added to a business owners policy (BOP).

Check with insurance companies that offer small business insurance and request a quote for alcohol liability. You can work with your agent or visit company websites to get a quote online.

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Alcohol Liability Insurance FAQs

What is the difference between host alcohol liability and alcohol liability coverage?

The difference between host liquor liability and liquor liability insurance is that liquor liability coverage is for businesses that sell or serve liquor, while that host liquor liability applies to businesses that allow people to drink on their property but do not sell liquor.

Alcohol liability insurance can be an endorsement to a general liability insurance policy, while host alcohol liability is part of a business’s general liability policy.

Alcohol host liability insurance is good for businesses that do not sell alcohol but allow people to drink on business premises.

Here’s an example of how Host Alcohol Liability coverage works. Let’s say a business serves alcohol at its annual party. An employee gets drunk at the party and causes a car accident on the way home. The other driver, injured in the accident, filed a complaint against the company. The company’s general liability insurance policy would cover the costs of the lawsuit.

Does general liability insurance include alcohol liability?

Alcohol liability coverage is not automatically part of a standard general liability insurance policy. Instead, you need to add it as an approval.

Do liquor stores need liability insurance?

A liquor store is a type of business for which a state may be required to carry liquor liability insurance to obtain a liquor license.

For example, Massachusetts requires insurance to obtain a liquor license. The minimum you must have is $250,000 of alcohol liability insurance for bodily injury or death and $500,000 for any accident resulting in the injury or death of more than one person.